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Helicopter Money Is In The Air Again

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The manifest failure of QE and ZIRP to restore the constitution of the global economy to robust health has once again left Keynesian-Monetarist economists scratching their empty heads.

Here, orthodox Keynesian know-nothing, Robert Skidelsky - who in 2013 heralded QE as 'the great new discovery of macroeconomic policy' - essays the prospects for unconventional fiscal policy, aka helicopter drops.

Unsurprisingly, he thinks helicopter money is a great idea and almost certain to work!

Anything to avoid letting the business cycle play out, eh Bob? :rolleyes:

Helicopter money comes in two forms, which could (and should) be dropped together. The first is to put purchasing power directly into the hands of consumers – for example, by issuing each voter or citizen with smart cards worth $1,000 each. The Swiss economist Silvio Gesell, who originally proposed a scheme of “stamped money” at the start of the last century, added a stipulation that balances unspent after a month should be taxed, to discourage hoarding.

Alternatively, helicopter money could be used to finance infrastructure spending. The advantage of such “monetary financing” is that such spending, while adding to the deficit and leading to a permanent increase in the money supply, would not increase the national debt, because the government would “owe” the money only to its own banker. This would eliminate the offsetting negative expectation of higher taxes.

Surely, issuing debt that never has to be repaid is too good to be true, right? There is indeed the obvious danger that governments might easily become addicted to monetary finance to pay for private and public spending, which is why it is unlikely to be tried openly unless economic conditions worsen significantly. But the political risk of doing nothing if we stumble into another recession (as seems quite likely) is worse. Like it or not, unconventional fiscal policy could well be the next game in town.

https://www.theguardian.com/business/2016/sep/22/helicopter-money-back-in-the-air

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Even the central bankers themselves have admitted that those sort of policies don't work except to line their own pockets. Some economists just seem to be yet another group stuck on the economic tram tracks for their own vested interest.

Edited by billybong

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This sounds like the perfect opportunity to trial out a Universal Basic Income model. If you are going to just drop the money into the economy anyway why not? UK Bank bailouts cost 850bn... a basic UBI using back of a fag packet math, would cost less than 100bn more per year than the current benefits system. It would give us a few years to work out the details and transition between the two...

UBI aside, I would like to see how helicopter money given directly to the public would play out.

I think it would be fascinating to see how the various retailers responded i.e. mass sales to tempt you to spend more with them or would we see prices at the tills noticeably increase because they know the money is burning a hole in your pocket.

Would all the pay day lenders cease trading for a Month or two? Would bank lending decrease and revenues from bank fees drop through the floor? Would universities increase their fees or introduce one off charges?

1 - 2K to the most financially vulnerable (and probably most exploited by the financial industry) would probably make a huge amount of difference to those individuals and remove a swathe of the population from a cycle of dependency on usury and money lending... of course we may just see a huge boost to TV and game console sales...

With our means tested benefit system, it could cause all sorts of interesting situations and unintended consequences...

Still, if you are going to drop that kind of cash on a population and have a choice from the bottom or from the top, I think dropping it on the the bottom at least the once would be a very valuable experiment to gain empirical data so we can generate a couple of academic papers and the odd Ig Noble award.

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I know a fair number of people who would drink and smoke £1k-£2k and continue on with their prior financial problems.

If one is not sensible with money charged at low rates, one is not likely to be sensible with genuinely free money.

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There is a debt trap, where if you didn't incur the higher interest rates and charges on bank account or use pay day lenders where people would be better off.

I think it would be interesting to see how much of a difference it would make to people in that cycle of debt.

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According to my economic theory that I've just made up, helicopter money should be safe as long as the amounts involved are significantly less than the amount of debt in the system. The helicopter money will just flow through the economy providing a stimulus until someone uses it to pay a debt, where it will effectively disappear.

I'm inclined to think the way out of this economic mess is to put interests rates back to a sensible level, and use helicopter money to compensate for the reduction in money supply.

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a basic UBI using back of a fag packet math, would cost less than 100bn more per year than the current benefits system. It would give us a few years to work out the details and transition between the two...

According to the ONS, the government spent £258Bn on welfare in 2014/15: http://visual.ons.gov.uk/welfare-spending/

258Bn / 65,0000,000 people = £3969.23 per man, woman and child per year.

£100Bn / 65,000,000 people = £1538.46 per man, woman and child per year.

That would add up to be £5507.69 per man, woman and child per year.

Let's say 30,000,000 get the money (working population), then it starts to sound better, but you then wonder on the productivity of the UK and how the whole thing could be funded. Surely we'd see a massive drop in income taxes as people work less? We're already net borrowing £8Bn a month.

Edited by canbuywontbuy

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According to the ONS, the government spent £258Bn on welfare in 2014/15: http://visual.ons.gov.uk/welfare-spending/

258Bn / 65,0000,000 people = £3969.23 per man, woman and child per year.

£100Bn / 65,000,000 people = £1538.46 per man, woman and child per year.

That would add up to be £5507.69 per man, woman and child per year.

Let's say 30,000,000 get the money (working population), then it starts to sound better, but you then wonder on the productivity of the UK and how the whole thing could be funded. Surely we'd see a massive drop in income taxes as people work less? We're already net borrowing £8Bn a month.

Surely the whole idea would be to give the same amount to everyone, working or not and then there would be no need for a benefits system except for people with extra needs eg some disabled. The amount would have to be enough to live on at a very basic level.

Not sure what they'd do about housing costs though. At the moment for instance the basic state pension is enough to live on if there's no mortgage or rent to pay.

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Well, personally I`ll take what comes.

This sounds like the ultimate cluster ****** though....

Quite. If we get a $1000 smart card with an expiry date of 1 month that will be our monthly shopping bill, petrol covered and any left over spent on durable food / grocery items to offset future purchases!

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Surely the whole idea would be to give the same amount to everyone, working or not and then there would be no need for a benefits system except for people with extra needs eg some disabled. The amount would have to be enough to live on at a very basic level.

Not sure what they'd do about housing costs though. At the moment for instance the basic state pension is enough to live on if there's no mortgage or rent to pay.

Then that would be roughly (according to my calculations in my previous comment) £5500 per man, woman and child per year - based on current welfare bill + £100Bn (squeeky's estimate). What if you're a single person living alone? That would not cover your expenses at today's cost of living. The welfare bill for UBI would be enormous, and I wonder what it would do to the income tax receipts? Surely they would fall as people don't NEED to work.

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There is zero chance of any money being dished out to the plebs who do the real work for the economy. End of story. If you were a banker that'd be another matter though..

Agreed.Any QE money will be used by Banks to buy and sell shares etc to each other while creaming off sales commissions. Just more Champus, Hookers and coke bonus money for the City boys.

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Then that would be roughly (according to my calculations in my previous comment) £5500 per man, woman and child per year - based on current welfare bill + £100Bn (squeeky's estimate). What if you're a single person living alone? That would not cover your expenses at today's cost of living. The welfare bill for UBI would be enormous, and I wonder what it would do to the income tax receipts? Surely they would fall as people don't NEED to work.

Forget the extra 100 billion.

People could live on a CI today. Works out at over £300 a month.

Perfectly doable. Even in an expensive place like Edinburgh.

Your life would be pretty dull and you'd have almost nothing left over for extra spending. But that's er sort of the point......

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Agreed.Any QE money will be used by Banks to buy and sell shares etc to each other while creaming off sales commissions. Just more Champus, Hookers and coke bonus money for the City boys.

Or alternatively, the banksters will use oil as a money substitute and store of value (a la 2008) and we'll see crude > $100 bbl again. Skidelsky's naive assumptions about the viability of helicopter money would be seriously challenged under such circumstances. Keynesian DSGE models contain no explicit role for energy, which is why they failed so conspicuously in the 1970s.

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CCC....

Yes this is exactly what I live on (£300 per month)

It`s not easy BUT I do have 50k which really changes everything. For a start I don`t really worry about money...ok 50k isn't much but it`s a lot when you`re naturally tight !

I suppose I`m like one of those people who save for multiple years but finally realise that I really never needed the money anyway !

The joke`s on me innit.

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CCC....

Yes this is exactly what I live on (£300 per month)

It`s not easy BUT I do have 50k which really changes everything. For a start I don`t really worry about money...ok 50k isn't much but it`s a lot when you`re naturally tight !

I suppose I`m like one of those people who save for multiple years but finally realise that I really never needed the money anyway !

The joke`s on me innit.

You are the poster boy of all the ***** who say "its too expensive"

It's not

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CCC....

It`s not easy BUT I do have 50k which really changes everything. For a start I don`t really worry about money...ok 50k isn't much but it`s a lot when you`re naturally tight !

I suppose I`m like one of those people who save for multiple years but finally realise that I never needed the money

You mean you dont to put down 10% down on a 1 bed flat in zone 2?

Just rent it innit!!

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